How the investment calculator works
The calculator grows your money one month at a time. Each month, the balance earns the expected return. Then your regular contribution is added (or added first, if you invest at the start of the month). Growth stays invested, so next month you earn a return on this month’s growth too. That snowball is compounding.
It can work in four directions. Pick what you want to find with Solve for:
- End balance: how much you will have, given your starting amount, contribution, return and time.
- Contribution: how much you need to add each month or year to reach a target.
- Time: how long it takes to reach a target with the contribution you can afford.
- Return rate: the yearly return you would need to reach a target in a set time.
The first three use the same formula. For the return rate there is no neat formula, so the calculator searches for the rate that lands exactly on your target.
The formula
For a starting amount P, a regular monthly contribution C, a monthly growth rate i and n months:
With contributions at the start of each month, multiply the second part by (1 + i).
Monthly growth i = (1 + r)^(1/12) − 1 for a yearly return r compounded annually.
The first part is your starting amount growing on its own. The second part is the future value of a stream of equal payments, which is called an annuity. Add them together and you have the end balance.
If you choose another compounding option under More options, the yearly rate is treated as a nominal rate. For example, 7% compounded monthly is an effective 7.229% a year. “Annually” is the default because investment returns are usually quoted as the yearly return you actually get.
Worked example: $500 a month for 20 years
Say you have $20,000 invested today and add $500 at the end of every month. You expect a 7% yearly return and plan to invest for 20 years. This is the calculator’s default.
- The $20,000 grows to $20,000 × 1.07^20 = $77,394.
- The 240 contributions of $500 total $120,000. With growth they become $253,768.
- The end balance is $331,162. You paid in $140,000, so $191,162 of it is investment growth.
Growth is more than you put in. That is normal over long periods, and it is why time matters so much. If you invest at the start of each month instead of the end, the balance is about $1,400 higher, because every contribution gets one more month to grow.
Turn on today’s money with 3% inflation and the same $331,162 is worth about $183,000 in today’s prices. That is still a lot more than you paid in, but it is the honest number to plan with.
Worked example: working backwards from a goal
Now say your goal is $500,000 in 20 years, with the same $20,000 start and 7% return.
- Solve for contribution: you need about $833 a month. Your $20,000 grows to $77,394 by itself, so the contributions must cover the other $422,606.
- Solve for time: at $500 a month you would get there in 25 years (the balance passes $500,000 in month 300).
- Solve for return rate: to reach $500,000 in 20 years with $500 a month, you would need about 10.1% a year. That is high for a diversified portfolio over a long time, which tells you the plan needs more money or more time rather than a riskier bet.
Working backwards like this is often more useful than a single projection. It shows which lever (more money, more time or more return) is the realistic one to pull.
How much difference the return makes
The table shows $500 a month with no starting amount, invested at the end of each month, at different steady yearly returns.
| Yearly return | After 20 years | After 30 years |
|---|---|---|
| 4% | $181,921 | $342,635 |
| 5% | $202,902 | $407,688 |
| 6% | $226,719 | $487,256 |
| 7% | $253,768 | $584,726 |
| 8% | $284,500 | $704,275 |
| 10% | $359,130 | $1,031,422 |
You pay in $120,000 over 20 years and $180,000 over 30 years. Notice two things. First, each extra 1% of return adds tens of thousands of dollars. Second, the last 10 years add more than the first 20, because the balance that is growing is so much bigger by then.
Starting early beats starting big
Compare two people who each invest $400 a month at 7%.
- One starts at 25 and stops at 65: 40 years, $192,000 paid in, about $988,600 at the end.
- The other starts at 35 and stops at 65: 30 years, $144,000 paid in, about $467,800 at the end.
Ten extra years and $48,000 more in contributions roughly doubles the result. The early years matter because that money has the longest time to compound.
You can see the same thing with a single deposit. $10,000 left alone at 7% for 30 years grows to about $76,100. Money roughly doubles every 10 years at 7% (the rule of 72 says 72 ÷ 7 ≈ 10.3 years; the exact figure is 10.24 years).
What return should you expect?
No one can promise a return. Prices of stocks and bonds rise and fall, sometimes sharply, and past results do not guarantee future ones. A few guidelines help you pick sensible inputs:
- Use a range. Run the calculator at a cautious rate, a middle rate and a hopeful rate. Plan your savings on the cautious one.
- Match the rate to the mix. A portfolio mostly in stocks has historically grown faster than one in bonds or cash, but with bigger drops along the way. A cash savings account pays a known rate but rarely beats inflation by much. The SEC’s Investor.gov explains how spreading money across asset types balances risk and reward.
- Subtract fees. Enter the return after fund fees and advisory fees.
- Think in today’s money. If you enter a return before inflation, switch on the inflation option. Or enter a “real” return (for example 7% minus 3% inflation, about 4%) and read every result as today’s money.
Fees: a small number with a big effect
A fee is taken from your balance every year, so it compounds against you. In the default example, cutting the return from 7% to 6%, which is what a 1% yearly fee does, lowers the end balance from $331,162 to $290,862. That is about $40,300 less after 20 years, from a fee that sounds small.
Investor.gov makes the same point with a $100,000 portfolio growing 4% a year for 20 years: a 1% yearly fee leaves you about $30,000 less than a 0.25% fee. Before you invest, check the expense ratio of each fund and any account or advice fees.
Rising contributions
Most people earn more over time, so they can invest more. Under More options, set Raise contributions each year by to, say, 3%. In the default example, raising the $500 by 3% a year (so $515 a month in year two, $530 in year three and so on) lifts the 20-year balance from $331,162 to about $396,700. Raising your rate a little with each pay rise is one of the easiest ways to invest more without feeling it.
Tips for using the result
- Check the yearly schedule. Expand any year to see the monthly figures, or download the full schedule as a CSV file for a spreadsheet.
- Use a tax-advantaged account first. A 401(k) with an employer match or a Roth IRA can make the same contribution go further, because less is lost to tax. The Roth IRA calculator shows tax-free growth and the yearly limits, and the 401(k) calculator adds an employer match.
- Keep an emergency fund outside your investments. Money you may need within a few years belongs in savings, not in the stock market. The savings calculator plans that pot.
- Measure what you already earned. If you want the return on an investment you have already made, use the ROI calculator to get the gain and the annualized return.
- Interest works the same way. The compound interest calculator applies this maths to savings accounts and shows the effective annual rate.
Limits of any investment projection
The calculator assumes the same return every year. Real portfolios might gain 20% one year and lose 15% the next. Two portfolios with the same average return can end with different balances, depending on the order of good and bad years, especially near the end when the balance is largest. Taxes on dividends and gains in a taxable account are not included. Use the result as a planning estimate, review it once a year, and adjust your contributions as your life changes.
This calculator is for education and planning. It is not investment, tax or legal advice.